UK house prices rebound modestly in May; investigation launched into Nationwide’s takeover of Virgin Money – business live
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Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Whether people feel wealthier can be a key factor in where they place their tick at the ballot box.
And those lucky enough to own a house became slightly wealthier this month, new data shows, while a separate report shows living standards have languished for more than a decade.
Lender Nationwide has just reported that UK house prices rose by 0.4% month on month in May, ending a two-month run of falling prices.
This has lifted the annual rate of house price inflation up to 1.3%, from 0.6% in April, with the average house price now £246,249.
Nationwide reports that the market is showing some resilience. Their chief economist, RobertGardner, says:
“The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer term interest rates in recent months. Consumer confidence has improved noticeably over the last few months (see chart below), supported by solid wage gains and lower inflation.
Photograph: Nationwide
The general election campaign is unlikely to disrupt the housing market much; Rightmove reported this week that 95% of people planning to move home say the election will not affect their plans.
The wider economic picture, though, is that the UK has been suffering weak income growth since the Great Recession.
The Institute for Fiscal Studies reports this morning that median incomes grew by just 6% between 2009–10 and 2022–23; before the 2008 crisis, economists would have expected growth of 30% over that 13-year period.
The IFS warns that there’s no “silver bullet”, but reforms to taxes, planning, education and more can make a material difference to the UK’s long-term prospects.
Mubin Haq, chief executive of abrdn Financial Fairness Trust, says:
‘Unfortunately, living standards have languished for more than a decade.
On a range of measures UK performance has been weak, especially in comparison to other wealthy countries. The danger is that stagnation becomes the new normal. This is in no one’s interests and stunts too many futures and too many lives.
Key to any future government will be a renewed drive to tackling hardship and improving living standards.’
Also coming up today
New Bank of England data will show how many mortgages were approved last month, another gauge of the housing market’s health.
Global investors are bracing for the latest US PCE inflation data, which measures price changes across a wide range of consumer expenses. A strong PCE report could throw more cold water on hopes of early US interest rate cuts, while a weak reading could put them back into play….
The agenda
7am BST: Nationwide house price index for May
7am BST: German retail sales
7.45am BST: French inflation report
9.30am BST: UK mortgage approvals and consumer credit stats
Karen Noye, mortgage expert at wealth manager Quilter, says the UK housing market is showing “considerable resilience” in the face of tough economic conditions, and the affordability squeeze.
This is likely in part due to the annual spring bounce as more buyers come to market making it more competitive. However, on an annual basis, prices have increased by 1.3%. The slight uptick suggests some stability, albeit under challenging conditions.
“Nationwide’s data reflects a modestly positive trend, but the housing market remains very unpredictable and the growth in house prices is modest. Monthly property transactions have been lower than expected, indicating a cautious market but this is no surprise given the stress the nation’s finances have been under.
“Affordability remains a significant challenge, particularly for first-time buyers who face rising mortgage rates and the ongoing pressures of living costs.
The beginning of summer may not have brought much sun but it did bring some modest house price growth. Buyers who believe prices have bottomed out & are keen to move before others recommence their property search make their move but often with longer mortgage terms. UK house… pic.twitter.com/Q2f6uTxXD2
Tom Bill, head of UK residential research at Knight Frank, says house prices do not feel poised to rally:
High supply is keeping a lid on prices and stubborn services inflation means swap rates are rising and mortgages starting with a ‘3’ feel some way off.
Asking prices still need to reflect the fact that buyers currently have tighter budgets and more choice. The general election is unlikely to impact mainstream property markets and if buyers want to know what prices will do next, the next inflation reading rather than the political manifestoes is the best place to start.”
“This is undoubtedly still a good time to market your property, but it is always worth speaking to an estate agent with a good understanding of prices in your area. While house price figures are useful for giving a top-level overview, they do not give you the granular detail that you might need to get the most out of your sale.
“Inflation came in higher than expected this month, which makes it increasingly unlikely that the Bank of England will lower interest rates in June.
“For the time being, people on tracker mortgages will face higher repayments and crucially for buyers it also means that some of the most attractive mortgage offers will be slower to return to the market.
Nationwide have also dug into their data, and found that past general elections do not appear to have generated volatility in house prices or resulted in a significant change in house price trends.
Average house prices have been indexed, to equal 100 in the election months in each of the years shown Photograph: Nationwide
Their chief economist RobertGardner says:
“On the whole, prevailing trends have been maintained just before, during and after UK general elections. Broader economic trends appear to dominate any immediate election-related impacts.
It’s a busy morning for Nationwide Building Society.
As well as their latest house price data, we’ve also just learned that the UK’s competition authorities have launched a merger inquiry into its £2.9bn takeover of rival Virgin Money.
The Competition and Markets Authority (CMA) says it is considering whether the deal – the biggest since the financial crisis – would lead to a substantial lessening of competition within the UK banking sector.
The CMA is seeking views from interested parties, by 14 June (details here).
Last week, Virgin Money shareholders have voted in favour of Nationwide’s offer, despite one investor claiming the takeover was “likely to sell shareholders very short”.
As well as the shareholder vote, the deal still needs formal approval from City regulators the FinancialConductAuthority and PrudentialRegulationAuthority, as well as signoff from the CMA.
We’ve launched our investigation into Nationwide Building Society’s potential acquisition of Virgin Money.
— Competition & Markets Authority (@CMAgovUK) May 31, 2024
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Whether people feel wealthier can be a key factor in where they place their tick at the ballot box.
And those lucky enough to own a house became slightly wealthier this month, new data shows, while a separate report shows living standards have languished for more than a decade.
Lender Nationwide has just reported that UK house prices rose by 0.4% month on month in May, ending a two-month run of falling prices.
This has lifted the annual rate of house price inflation up to 1.3%, from 0.6% in April, with the average house price now £246,249.
Nationwide reports that the market is showing some resilience. Their chief economist, RobertGardner, says:
“The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer term interest rates in recent months. Consumer confidence has improved noticeably over the last few months (see chart below), supported by solid wage gains and lower inflation.
Photograph: Nationwide
The general election campaign is unlikely to disrupt the housing market much; Rightmove reported this week that 95% of people planning to move home say the election will not affect their plans.
The wider economic picture, though, is that the UK has been suffering weak income growth since the Great Recession.
The Institute for Fiscal Studies reports this morning that median incomes grew by just 6% between 2009–10 and 2022–23; before the 2008 crisis, economists would have expected growth of 30% over that 13-year period.
The IFS warns that there’s no “silver bullet”, but reforms to taxes, planning, education and more can make a material difference to the UK’s long-term prospects.
Mubin Haq, chief executive of abrdn Financial Fairness Trust, says:
‘Unfortunately, living standards have languished for more than a decade.
On a range of measures UK performance has been weak, especially in comparison to other wealthy countries. The danger is that stagnation becomes the new normal. This is in no one’s interests and stunts too many futures and too many lives.
Key to any future government will be a renewed drive to tackling hardship and improving living standards.’
Also coming up today
New Bank of England data will show how many mortgages were approved last month, another gauge of the housing market’s health.
Global investors are bracing for the latest US PCE inflation data, which measures price changes across a wide range of consumer expenses. A strong PCE report could throw more cold water on hopes of early US interest rate cuts, while a weak reading could put them back into play….
The agenda
7am BST: Nationwide house price index for May
7am BST: German retail sales
7.45am BST: French inflation report
9.30am BST: UK mortgage approvals and consumer credit stats
